OKLAHOMA CITY (AP) — Oklahoma’s treasurer and state auditor say an accounting change has cities and schools in the state facing a possible downgrade in their credit rating, which in turn could drive up the cost of borrowing money.
Beginning in fiscal year 2015, the Governmental Accounting Standards Board is set to require many Oklahoma schools and cities to list millions of dollars of pension debt on their financial statements even though they “don’t owe it” and “can’t legally pay it,” state Auditor and Inspector Gary Jones told The Oklahoman.
“It is an accounting nightmare. It is an auditing nightmare,” Jones said.
That should concern taxpayers, because the change could potentially prompt credit rating agencies to downgrade the credit ratings of Oklahoma cities and schools, which, in turn, could lead to higher interest rates on bond issues those entities often use to finance large projects and that taxpayers would have to finance, he said.
State Treasurer Ken Miller said he and other Oklahoma State Pension Commission officials have sent a letter to Governmental Accounting Standards Board officials asking for changes in the proposal.
State treasurers, as a group, also have voiced unified opposition to the accounting change, he said.
Nevertheless, the Governmental Accounting Standards Board has decided to change accounting rules and require schools and cities to list their proportionate share of the state’s pension debt on their individual balance sheets.
At issue is who is truly financially responsible for about $11.4 billion in pension debt accumulated by the state’s seven retirement systems.
Jones said state statutes and a state Supreme Court ruling say the State of Oklahoma is responsible for all the pension fund debt, not individual cities and school districts, adding that the only way he knows to possibly stop the change from affecting cities and schools now is through special legislation.
“We need for the Legislature to look at creating what’s called a special funding situation that basically says this pension obligation rests with the state and we’re not going to push it down to somebody that doesn’t owe it,” he said.
Kenton Tsoodle, assistant finance director for Oklahoma City, said cities are closely watching to see what the state does.
“Any increase in liability that’s unfunded that goes on your books will always be looked at negatively by rating agencies. The question is always how negative is it looked upon,” he said.